Continuous improvement: Better reporting for driving efficiency

Esther Oh, GAICD, CRMA, CISA, CPA (Aus)Esther.oh@ausasiaresources.com

Introduction

Information rich = time poor

Follow the 10-20-30 Rule…

Session Outline

Dashboard reporting Information criteria Key Risk Indicators Key Performance Indicators Tips on dashboard reporting

Would you prefer to read this ….

Example 1: Extract of sample company financials from JD Edwards Source: docs.oracle.com

Or this?

Example 2: Same information extracted into a Dashboard Source: docs.oracle.com

Example 3 : A typical Sales Dashboard Source: docs.oracle.com

A good dashboard provides key information in a clear and concise manner that supports decision making.

It provides information on business performance that can be easily evaluated to identify:

- key drivers and risks- key trends and forecasts- meaningful insights- areas for improvement

Benefits of dashboard reporting

Easy to read and digest in clear and concise presentation

Highlights key issues, risks and trends in a snapshot

Provides key areas of focus and priorities

Encourage management by exception

Saves significant time and resources

Improve real-time decision making

Limitations of dashboard reporting Not a One Size Fits All solution

Needs to be tailored for the audience, business and industry

Quality depends on the frequency and accuracy of data collected

Needs to be reviewed regularly to remain relevant and up-to-date

Value is lost if it starts to dive into great detail and complex drivers

BEWARE of the inherent risks in using spreadsheets and macros. Recommend use of business intelligence software to extract information from your financial reporting software rather than export and manipulate in Excel where possible.

What to consider in dashboard reporting

1. Content

2. Design

3. Delivery

You need to Plan!

Make it Easy and Engaging to use

Source: http://cdn.ttgtmedia.com/digitalguide/images

Content - Information Criteria

Source: http://www.aasb.gov.au

Selection of information: Relevant Reliable Material

Presentation of information: Comparable Understandable Timely

Remember SAC 2 OBJECTIVE OF FINANCIAL REPORTING : Provide information that is USEFUL for DECISION MAKING

SAC 3 QUALITATIVE CHARACTERISTICS OF FINANCIAL INFORMATION:

Design

Example 4: Financial Dashboard with tracking barometers

Design with the audience in mind:

- Demographics

- Financial literacy levels

- Jargon/language used

- Impact/consequences & importance of selected info

- Frequency of information required

DeliveryHow will it be delivered?

A 20-minute Powerpoint presentation?

Hardcopy reports?

Online through the portal?

On mobile devices?

Accessible anytime, anywhere?

Analyses past financial figures and ratiosto determine the health of the business

Technical analysis

KRIs KPIs

Fundamental analysis

Focus

What to include in a DashboardDirects time, efforts and resources effectively to key focus areas to maximise returns and

minimize risks/losses

Uses charts to predict trends and preparefor the future

Highlights key risks and monitors key performance measures

It drives the business to be more efficient, thus improving financial performance while reducing risks that may adversely impact the business.

ExamplesExecutive Summary of PNL & BS:Top 10 Products/Services/CustomersGM/NP Current against BudgetedTop 10 Expenses spent against budgeted

KRIs:AR turnover daysActual bad debts vs Prov of doubtful debtsCash balances, forecasts vs actual, working capital availableQuick ratio, leverage ratio, debt to asset ratio

KPIs:Sales Actual vs TargetSales performance by employee/regionCost savings achieved by department Example 5: Simple dashboard constructed in Excel

KRIs & KPIs should be:

SpecificMeasurableAuditableRelevantTimely

Whilst many companies measure by KPIs, very few track their KRIs …when risks not managed are often the ones that cause the company’s downfall!

Key Risk Indicators Key Performance Indicators

Metrics that provide early warning of increasing risk exposure

Metrics that provide high level indication of past performance

Provides forward looking insights on achieving the organization’s objectives BEFORE the risk event is triggered

Provides historical performance of the organization AFTER results have been achieved

Mapping KRIs to critical objectives and KPIs decreases likelihood for management override

Rewarding on KPIs alone increases likelihood of management override

Promotes risk awareness, proper management of risks and healthy risk culture

Measuring by KPIs alone can lead to unnecessary risk taking and unhealthy risk appetite

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Illustrative Example

Risks: Slowing economy => customers default => negative impact on cash flow affects => ability to pay bills on time

Objective: Manage the collection of accounts receivables to reduce write-offs and financial loss

Strategies: Issue payment reminders 5 days before Due Date, Call customer 5 days after Due Date if not paid, Escalate to CFO after 15 days overdue, package debt to debt collection agency

KRI: Accounts receivables turnover/month, payment trend for the top 25 customers

Corresponding KPI: Bad debts written off <5% Provision of Doubtful Debts/month

Tips for better reportingThe Secret recipe for Success:

- Keep it highly Visual and Interactive using drop-down menus and navigation

- Use charts and symbols like traffic lights, barometers, up/down arrows, trends

- Be prudent with colours

- Keep numbers to a minimum

- Keep communicating and continuously improving

Useful References

www.ausasiaresources.com/blog

www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/business/dashboard-reporting.pdf

Thank YouTwitter: Oh4Esther

esther.oh@ausasiaresources.comau.linkedin.com/in/ohesther